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From Compromise Agreement to Settlement Agreement

8 July 2013: Compromise Agreements to change their name to Settlement Agreements

From the 29 July 2010 ”compromise agreements’ will become known as ‘settlement agreements’ but other than the name, the form will not be changed (see S.14 of the Enterprise and Regulatory Reform Act 2013 and, amending S.111A of the Employment Rights Act 1996

Settlement offers cannot then be used as evidence in employment tribunals in unfair dismissal cases, provided there has been no improper behaviour in the process of discussing the agreement. There appears to be little or no difference between this statutory provision and the use of ‘without prejudice’ negotiations, except that employers sometimes forget to pre empt such negotiations by stating that they are ‘without prejudice’

According to reports the ACAS Code of Practice is intended to provide a clear explanation of the law relating to this new form of inadmissibility when negotiating settlement agreements. Acas has decided to, amongst other things:

  •  include information on what parties must do to make a settlement agreement legally valid. However most lawyer’s Settlement Agreements are likely to already cover these basics.
  • not specify how settlement offers should be made. They can be oral, but the final agreement must be in writing
  • specify ten calendar days as the minimum time period to consider the formal written offer on which independent advice must be obtained, which many employers will think is somewhat slow
  • there will not be a statutory right to be accompanied by a colleague or trade union representative in settlement agreement discussions (only disciplinary, dismissal and grievance meetings as at present)
  • clarify to some extent what would be regarded as improper behaviour in settlement agreement discussions which would enable employees to then refer to those discussions in Tribunal procedings. The ‘illustrative’ list will include all forms of victimisation and harassment.
  • set out template letters in the non-statutory guidance which may be helpful, but may also be a tad basic.

No doubt many lawyers will be updating their draft settlement agreements at this time. See our main page on Settlement Agreements

With thanks to the ELA for this news.

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